GST was launched in India with ambitious aims for the tax ecosystem and from the revenue data. From the response of the majority of taxpayers, it seems to be a resounding success. The average monthly collection has gone from about Rs 82,200 crore during the first nine months to Rs 1,50,800 crore during 2022-23, rising further to Rs 1,72,000 crore in the first two months of the current fiscal.

As per a recent study by the secretary and joint secretary of the Department of Revenue, the buoyancy of GST during the five-year period 2018-2023 stood at 1.25 despite a series of rate cuts during 2017-18, while the tax buoyancy for subsumed taxes during the five-year period immediately preceding GST stood at 0.998. This is a remarkable rise of more than 25 per cent.

On the taxpayer-experience front too, GST has done remarkably well. Going by a recent survey by a leading tax consulting agency, 94 per cent of the industry (88 per cent of MSMEs) surveyed expressed “positive” sentiment towards the new tax regime. The revenue performance and sentiments expressed have taken a lot of doing on the part of team GST led by the late Arun Jaitley — comprising state finance ministers and key officials of the central and state governments. While the consensus-building effort was steered by Jaitley, the officials worked out the structure, design and nuts and bolts of the new tax. It was a humongous task considering that it called for a grand unification across 37 different tax jurisdictions, 16 different tax levies and 15 kinds of cesses/surcharges under eight different constitutional entries comprising multiple legal frameworks, IT systems and tax administration systems. The situation was even more chaotic on the ground with more than 100 registration forms while the total number of tax returns exceeded 150. Restrictions on the movements of goods were rampant with different e-way bills and check-posts across most of the country. All this induced considerable complexity in the business environment manifested in multiple compliance burdens, cascading and the impaired competitiveness of Indian industry.

The unified GST has replaced more than 100 different statutes governing VAT, entry tax, entertainment tax, luxury tax and advertisement tax with essentially two statutes — one dealing with local supplies and the other dealing with inter-state and international supplies. The multitude of forms and returns is now down to a single country-wide registration, just one return format and a single document for moving goods across the country with no check-posts. The GST regime has managed to reduce turnaround time for goods vehicles by more than 50 per cent and has led to a reduction in logistics costs. It has also significantly widened the tax net with the number of registered taxpayers going up to 140 lakh from 65 lakh which has increased the formalisation of the economy. The common portal has brought all of India to a common platform for tax compliance and administration. All this has significantly furthered ease of doing business and has enhanced the efficiency of business entities through improved supply-chain management, reduction in cost of goods/services and enhanced competitiveness of industry.

The system is now handling more than about one crore returns and around nine crore e-way bills, generated by around 23 lakh taxpayers every month. In addition, around 6 lakh large taxpayers are reported to be uploading around 10 crore invoices every month. Data of such magnitude is unheard of in any tax administration system across the globe. However, non-intrusive compliance systems have also, to an extent, enabled unscrupulous elements to enter the system and misuse the most important and redeeming feature of GST — the seamless flow of credit across the country. Investigations have led to the unearthing of fake credit networks engaged solely in passing of fake credit in the system.

GST 2.0 should, accordingly, focus on ways and means to enable the entry of only genuine businesses into the system and facilitate the compliance of entities in the system. This will impart efficiency and neutrality to the tax system. Accordingly, policymakers should strive to design and put in place effective entry barriers for people looking to game the system. “Risky” applicants may be identified by the system at the application stage itself by using AI and ML tools and performing rigorous verification before granting registration.

The current drive to identify fake registrants may be intensified. Further, the volume of credit passed can be linked to the financial capability of the supplier. Most of the disclosures required to be made by a supplier may be auto-generated from the basic e-invoice with increased integration across the various modules functional on the common portal. The tax liability and credit of a business should, accordingly, be auto-drafted and mismatches should be handled by the system through standardised interactive responses.

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The system should move towards locking liabilities and claims declared through forms and statements and also enable largely automated responses by taxpayers to automated system-based queries by tax officials. These efforts will help in preventing leakage of revenue which is going to be important as the assured revenue growth to states coming to an end. The cess being levied too would end before March 2026. The council may take a call on merging the current cess with the regular tax on products on which the same is levied. Rate rationalisation, correction of inverted duty structure, online gaming and betting are some of the issues pending for long. With inflation under control, the council can take a call on these in the near future. Another issue that the council would like to apply itself to is bringing petroleum products under GST with an effective transition mechanism.

I am sure that GST in India is set to become the most advanced and efficient tax system in the world.